On December 7, 2022, President Biden signed the Speak Out Act (the “Act”) into law. The Act limits the enforceability of pre-dispute non-disclosure and non-disparagement clauses relating to sexual assault and sexual harassment claims, but does not prohibit such provisions in settlement agreements or severance agreements.
In 2018, California passed Senate Bill 820, the STAND Act (Stand Together Against Non-Disclosure Act), in response to the #MeToo movement. SB 820 prohibited the use of confidentiality provisions in settlement agreements where the underlying claims were based upon sexual assault, sexual harassment, and workplace harassment or discrimination based on sex. The law did not extend to claims based upon other protected characteristics. Therefore, a confidentiality provision in a settlement agreement could not prevent an individual from discussing the factual information related to sexual harassment or sex discrimination allegedly experienced in the workplace, but could preclude an individual from discussing factual information related to harassment or discrimination based upon any other protected characteristic (e.g., race, age, gender, etc.). You can read our prior blog article here.
Continue Reading California’s SB 331 Extends Sweeping Changes to Workplace Settlement and Separation Agreements
The Equal Employment Opportunity Commission (“EEOC”)—the agency tasked with enforcing federal labor laws—was deputized by Congress in 1972 with authority to bring lawsuits against employers for violating anti-discrimination laws and retaliating against employees. Since then, the agency has made a concerted and aggressive effort to challenge, among other things, standard clauses in separation agreements that have the potential to chill former employees’ participation in legal actions against their former employers, including non-cooperation and covenant not to sue clauses. This concern is especially salient in the age of COVID-19, where many employers are using separation agreements at a breakneck pace due to the unprecedented rate of employee layoffs, and EEOC enforcement actions may be just around the corner.
Continue Reading Employee Separation Agreements Likely to Face Increased EEOC Scrutiny
The New Year brings new laws for Illinois employers. Some laws go into effect this Summer, while others are effective as of this month. For employers who have not yet revised handbooks, policies and agreements, the time is now. Below is a brief summary of the new laws.
Continue Reading The Time Is Now for Employers in Illinois to Abide by New Laws
On January 1, 2019, California’s Senate Bill No. 1431 went into effect, making a slight, but potentially significant amendment to Civil Code Section 1542. The prior version of the statute read: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” SB 1431 amended Section 1542 to now read: “A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.” The amended version of the Code adds “releasing party” and “released party” alongside creditor and debtor, respectively, and also changes “must have materially affected” to “would have materially affected” the releasing party’s decision to settle.
Continue Reading California Legislature Amends Section 1542: Are Employer Settlement Agreements Now More Vulnerable to Attack?
The California Court of Appeal for the Fourth District recently refused to enforce a covenant not to compete against the former employee and selling shareholder of a video game company. In Fillpoint, LLC, v. Maas et al., Case No. G045057, 2012 Cal. App. LEXIS 914 (Cal. Ct. App. Aug. 24, 2012), the Court of Appeal determined that half of a two-part noncompete agreement entered into in the context of the sale of a business was unenforceable, despite the exception for such covenants found in Business and Professions Code Section 16601 (“Section 16601”). This case answers what had previously been an open question under California law: Whether an acquiring company can obtain a non-compete that begins to run upon termination of employment (as opposed to or in addition to a non-compete that begins to run upon closing) from a shareholder who becomes an employee of the buyer. See Hilb, Rogal & Hamilton Ins. Servs. v. Robb, 33 Cal. App. 4th 1812 (1995) (enforcing a noncompete agreement against a selling shareholder that commenced at termination of employment, without any discussion or analysis of whether using termination of employment as the trigger for a noncompete violates Section 16601).
Continue Reading California Court Of Appeal Refuses To Enforce Non-Compete Against Selling Shareholder
In Edwards v. Arthur Andersen LLP, the California Supreme Court reaffirmed California’s strong public policy against covenants not to compete. The primary issue in the case was whether the Ninth Circuit’s "narrow restraint" exception was a proper interpretation of California law. Under the narrow restraint exception, employers could enforce non-competition agreements that did not "entirely preclude" an employee from practicing his or her trade. The Supreme Court summarily rejected this exception. The lesson for employers is that unless a covenant not to compete falls squarely within one of the statutory exceptions, it is not likely to be upheld by a California court.
Every day employers terminate employees and pay significant sums to departing workers in exchange for a release of claims. Such agreements can give employers a measure of comfort and certainty while at the same time offering departing employees value and simplicity. However, when a departing employee is 40 years of age or older, and release language is intended to include potential claims under the Age Discrimination in Employment Act of 1967 (the “ADEA”), the agreement must meet all of the requirements of the Older Workers Benefit Protection Act (the “OWBPA”). Wells v. Xpedx, a United States District Court case from the Middle District of Florida, illustrates the potential pitfalls of failing to do so carefully.